Authorities are in the midst of a huge investigation of the State Compensation Insurance Fund for workers compensation fraud in California. The fund is a hybrid: the employees are state workers, but the behemoth insurer is not subject to the rules normally governing state entities. They operate in secret, outside the reach of Open Meeting laws.

SCIF is quasi-public and quasi-accountable. They manage $22 billion in assets, with little oversight, minimal checks and balances and what appears to be wildly indiscriminate spending. With a quarter of the state market, the fund generates $3.5 billion in premium - more than the total premium in most states. And that's way down from the 2003 level of $7.6 billion.There is (moderately) good news and a lot of bad news in the audit released today.

The good news is that the fund does not appear to achieve anywhere near the level of corruption found in Rhode Island's Beacon Mutual or in Ohio's "coingate." The bad news is that there has been little accountability in the fund, with millions spent on vague IT projects and dubious marketing activities. There was rampant conflict of interest as well, with board member organizations benefiting directly from huge contracts. And there was a lot of driving around: the fund has a fleet of 2,000 motor vehicles - 1 for every 4 employees.

As with Beacon Mutual, the Fund has digested the audit and issued assurances that they will implement most of the 110 recommendations. Only time will tell. Fortunately, despite the fund's huge level of premium, CA remains a highly competitive market. Private carriers have held their own against SCIF, which indicates that the fund did not have the grotesque competitive advantage enjoyed - and abused - by Beacon Mutual.

As for outright corruption, there is an ongoing criminal investigation by the California Highway Patrol, the California Department of Insurance and San Francisco District Attorney's office. With all the money on (and under) the table, we can safely assume that if they dig hard enough, they will certainly find something. For the moment, when it comes to corruption, Ohio holds on to the number one spot, with Rhode Island a respectable second. My money is on California. When it comes to corruption, size does matter.